Patel v National Westminster Bank Plc

This is an appeal against the order of His Honour Judge Seymour Q.C. sitting as a Judge of the Queen’s Bench Division by which he refused the appellant, Mr. Jignesh Patel, permission to amend his particulars of claim in an action against the respondent, National Westminster Bank Plc (“NatWest”).

The action arises out of a lost cheque. On 31^st July 2006 a Kenyan company, Reinforced Trading Ltd (“RTL”) drew a cheque in favour of Mr. Patel for KES18 million (equivalent to about £137,000) on a Kenyan bank, Southern Credit Banking Corporation Ltd (“SCB”). It did so at the request of a Mr. Jirongo, a former business partner of Mr. Patel, who apparently owed him a sum of money following the termination of their joint business venture. On 1^st August 2006 Mr. Patel paid the cheque into his account with NatWest over the counter at its branch in Portman Square, London. Unfortunately, the cheque was never presented to SCB for payment because it went missing somewhere in the banking system.

In July 2012 Mr. Patel brought proceedings against NatWest for breach of its duty to him as its customer seeking to recover the face value of the cheque. By that time it had become apparent that the account on which the cheque had been drawn had been overdrawn throughout the period between July and the end of December 2006 and had been closed in January 2008.

The particulars of claim, which had been amended in July 2013, set out the nature of Mr. Patel’s case in relation to loss and damage as follows:

“16.

By letter dated 26 January 2009 the Defendant was informed by Southern Credit that “as at the date of presentation of the cheque” (which the claimant assumed to be a reference to 1 August 2006) there were insufficient funds in the account of RTL held at Southern Credit (account number 006110015) (“the RTL account”) to honour the cheque. To date the claimant has been unable to establish whether there would have been sufficient funds in the RTL account at any time between 2 August 2006 and 1 September 2006 to honour the cheque. The claimant has sought to obtain this information from Southern Credit but has not yet received an answer.

. . .

18.

If and to the extent, once presented by the defendant to Southern Credit, the cheque would have been dishonoured owing to insufficient funds in the RTL Account, the claimant lost the chance to take legal action against RTL, the drawer of the cheque and to recover, inter alia, the sum of 18,000,000 Kenyan Shillings or damages in the same amount. The loss of chance was caused by the defendant.”

Thus, although framed in conditional terms, the case being put forward was in substance that the cheque would have been dishonoured on presentation for payment and that its loss had prevented Mr. Patel from taking proceedings against RTL to recover the face value.

The trial was fixed for 7^th April 2014 before Judge Seymour. On the first day of the trial counsel representing Mr. Patel applied for permission to re-amend the particulars of claim in such a way that paragraph 16 would provide as follows:

“16.

By letter dated 26 January 2009 the Defendant was informed by Southern Credit that “as at the date of presentation of the cheque” (which the claimant assumed to be a reference to 1 August 2006) there were insufficient funds in the account of RTL held at Southern Credit (account number 006110015) (“the RTL account”) to honour the cheque.Notwithstanding this, Southern Credit would have honoured the cheque if it had been presented, either because:

16.1

Southern Credit would have permitted RTL to run into further overdraft to enable it to honour the cheque (as it did with other cheques); and/or

16.2

Southern Credit would have contacted RTL asking it to transfer in sufficient funds to enable it to honour the cheque and RTL would have done so.To date the claimant has been unable to establish whether there would have been sufficient funds in the RTL account at any time between 2 August 2006 and 1 September 2006 to honour the cheque. The claimant has sought to obtain this information from Southern Credit but has not yet received an answer. Notwithstanding this

By the amendment, therefore, Mr. Patel sought to raise an alternative case, inconsistent with that currently pleaded, based on the proposition that the cheque would have been honoured on presentation. NatWest opposed the proposed amendment on the grounds that it amounted to putting forward a completely new case which it could not be expected to deal with at that stage of the proceedings.

The judge noted that the proposed amendment involved, first, an allegation that SCB would have advanced funds to RTL sufficient to cover the cheque and second, an allegation that RTL would have put SCB in funds in order to enable it to honour the cheque. He rejected the first in robust terms, saying that there was not a scrap of evidence before him to support the contention that SCB would have made the necessary funds available. He also rejected the second on the grounds that Mr. Patel had no real prospect of showing that RTL would have made funds available for the purpose. The judge therefore refused permission to amend the particulars of claim on the grounds that the proposed re-amendments were unsustainable, but he also made it clear that, even if he had been persuaded that they gave rise to an arguable case, he would have refused permission for the amendments in the exercise of his discretion.

Following that decision Mr. Patel conceded that the case as pleaded in paragraph 16 of the amended particulars of claim could not succeed and judgment was entered for NatWest. One reason for that decision may have been a realisation that RTL had received no consideration for the cheque.

Mr. Cumming submitted that the judge had been wrong to hold that the case raised by the proposed amendment was unsustainable. He argued that RTL’s bank statement showing movements in and out of the account during the latter part of 2006 was evidence from which a court could properly infer that SCB was willing to advance funds to RTL to enable it to meet its liabilities. He also submitted that there was evidence from the bank that it would not have dishonoured the cheque without first referring to its customer and that the very fact that RTL had issued the cheque in favour of Mr. Patel tended to support the conclusion that, at least in August 2006, it intended to pay him. There was therefore a strong likelihood that SCB would have asked RTL whether it was willing to fund the cheque and that RTL would have done so.

Under Part 24 of the Civil Procedure Rules the court may give summary judgment against a claimant if it is satisfied that the claim has no real prospect of success. It follows that when an application is made to amend the particulars of claim to introduce a fresh claim or a new basis of claim the court is entitled to consider whether the case which the claimant seeks to introduce has any real prospect of success, since, if it does not, it would be a waste of time and money (let alone a waste of scarce judicial resources) to allow it to go to trial. In my view, therefore, the judge was right to ask himself that question, even though, as he appears to have accepted, the amendment would not have given rise to the need for an adjournment or the need to obtain additional evidence.

In my view the judge was also right to hold that the first way in which Mr. Patel sought to put his case was unsustainable. The statement of account, on which Mr. Cumming relied, was the only evidence before the court of the relationship between RTL and SCB. It shows that between the end of July and the end of December 2006 SCB was willing to tolerate an existing overdraft on the account of between about KES 45 million and KES 55 million, but it is not capable of supporting the inference that in the late summer and autumn of 2006 SCB was willing to advance RTL the necessary funds to enable it to meet the cheque. If anything, it tends to suggest otherwise. The statement does not reflect an active trading account, most of the entries relating to items such as commission on unpaid cheques, fees and interest charges. The two main debit entries in early August 2006, each of KES7.5 million, do no more than reverse corresponding credit entries a few days earlier. The debit entries on 14^th and 15^th November 2006 are covered by a corresponding credit entry on 15^th November, suggesting that there was a specific arrangement to provide funds to cover them. The statement does not evidence an account in respect of which SCB had agreed a running overdraft facility and in any event KES18 million would have been a very large amount in that context. There was simply no evidence before the court capable of supporting the case that SCB would have advanced the funds needed to honour the cheque and this element of the proposed amendment had no real prospect of success.

The second line of argument was in my view little better. The only evidence of the circumstances in which the cheque had come to be issued was to be found in the witness statement of Mr. Patel himself. He said that in order to return his investment in their former business, Mr. Jirongo had agreed to obtain a cheque from RTL in his favour. The nature of Mr. Jirongo’s connection to RTL was and remains unclear, but it was not suggested that RTL itself had anything to gain by providing funds to Mr. Patel. Nor is there any evidence of RTL’s business or financial position. The only evidence of that is what appears in the bank statement, which is not very encouraging.

I accept that normally when a person issues a cheque it can be assumed that he intends to honour it, but he usually has funds in his account, or expects to have them there, by the time the cheque is presented. However, that does not always turn out to be the case, whether by accident or design. If Mr. Patel had been able to provide any evidence to suggest that RTL was a reputable company with significant assets, that might have tended to suggest that, even if the relevant account were heavily overdrawn when the cheque was issued, it would have made arrangements to honour the cheque. Similarly, if there had been evidence that those who ran RTL were obligated to Mr. Jirongo to ensure that Mr. Patel received his money, that might have helped. There is no such evidence, however, which is itself a little surprising, given that, according to Mr. Patel, his cousin is involved with RTL in some way. Moreover, it is difficult to see why RTL, which seems to have received no consideration for it, should have been willing to put up the funds required to meet a cheque drawn on an account which, even at the time it was drawn, was heavily in overdraft. Mr. Patel says that he telephoned Mr. Jirongo many times seeking to obtain his money, but always received the response that the original cheque had to be returned before a replacement would be issued. That smacks of prevarication and, needless to say, the funds have never been forthcoming.

In support of the submission that RTL would have made funds available to meet the cheque Mr. Cumming sought to rely on Mr. Patel’s evidence that Mr. Jirongo had told him that if the cheque had been presented in time there were funds available to honour the payment. However, they were certainly not in the account on which the cheque had been drawn and there is no evidence of any kind to support what is nothing more than the report of a bare assertion on Mr. Jirongo’s part.

In my view the judge was entitled to hold that this limb of the amendment was also unsustainable, in the sense that on the basis of the evidence before him it had no real prospect of success. RTL did not have sufficient funds in the account to meet the cheque at any time when it ought to have been presented for payment and there is no evidence that it had funds elsewhere that it could have made available for that purpose, much less that it would have done so. To say that RTL would have honoured the cheque on presentation is therefore nothing more than speculation. Mr. Cumming sought to argue that NatWest’s negligence had deprived Mr. Patel of the chance of recovering the funds from RTL, but in my view that does not take the matter any farther. Mr. Patel’s case must be, and indeed is, that if NatWest had presented the cheque in due time it would have been honoured in full. As in all cases in which it is required to assess a hypothetical situation, if the court were satisfied that the cheque might have been honoured, but might not, it would have to determine when it came to assessing damages what were the chances of its being honoured. However, the question for the judge in this case was whether the claim had any real prospect of success at all, that is, whether there was any real chance that the cheque would be honoured. In my view he was right to conclude that on the evidence before him there was not, which is the same as saying that the chance of being paid was too small to be capable of assessment. This second element of the proposed amendment was therefore also unsustainable and there was nothing to be gained by giving permission to introduce it.

That makes it unnecessary to consider whether, if the proposed amendment had raised an arguable case, the judge would have been justified in refusing permission to amend because of the very late stage at which the application had been made.

I would therefore dismiss the appeal.

I have had the advantage of reading each of my Lords’ judgments in draft. Although all three of us are agreed that this appeal falls to be dismissed, Vos L.J. disagrees in some respects with the analysis undertaken by Moore-Bick L.J. The focus of disagreement is upon the ‘second line of argument’ identified by My Lord, Moore-Bick L.J., at paragraphs 13 to 16, in which he concludes that the second limb of Mr Patel's new case was unsustainable as the evidence before the court failed to establish that it had any real prospect of success. In contrast, Vos L.J. identifies five aspects of the evidence which, whilst not necessarily strong, needed to be considered by the judge and, if they had been considered, would have led to the conclusion that there was at least some prospect of Mr Patel establishing at trial that the cheque would have been honoured had it been presented on time. Vos L.J. therefore goes on to consider how the judge should have undertaken the exercise of judicial discretion and concludes that the proposed amendments should not have been allowed.

The difference between the conclusions expressed by my Lords is not great. Moore-Bick L.J. does not hold that there is no evidence to support the second limb; his analysis of the available evidence at paragraphs 13 to 15, with which I agree, concludes that such evidence as was available failed to give Mr Patel any prospect of success. Vos L.J. has been more specific in identifying a list of five particular pieces of evidence. Of the five, the strongest would seem to be (i) a statement made by RBS to the effect that they had been told that a duplicate cheque was likely to be honoured and (iii) the fact that the original cheque had been issued by RTL, which would normally indicate an intention that it would be honoured. However, (i) was evidence that stood entirely alone, it was unexplained and unsupported by any other material and (iii) when seen, as the judge could see it from the bank statements, in the context of the cheque being drawn on an account that was already substantially overdrawn, would seem to have little evidential weight. The three remaining elements are, in my view, of even less substance. These five specific matters, either taken individually or together, could not, in my view, establish any real prospect of success for Mr Patel.

Therefore, despite the respect that I have for the approach that my Lord, Vos L.J., has taken, I agree with and adopt the analysis that my Lord, Moore-Bick L.J., has given in his judgment. I would therefore dismiss the appeal for the reasons given by Moore-Bick L.J.

I am grateful to Moore-Bick LJ for setting out the facts of this appeal so clearly and concisely, and I will adopt all his abbreviations. I am not, however, in complete agreement with the conclusions that he draws from the underlying facts.

As Moore-Bick LJ has said, the court considering whether to grant permission for any amendment has first to consider whether the amended claim has a real prospect of success (see the note at CPR 17.3.6). If it has such a prospect, the court will go on to consider whether, as a matter of discretion, the amendment should be allowed (see Swain-Mason v. Mills & Reeve LLP [2011] 1 WLR 2735 from which the judge cited extensively at his paragraph 26).

The starting point here, in my judgment, is that NatWest appears to have lost RTL’s cheque, so that it was unable to present it to SCB for payment on Mr Patel’s behalf in accordance with its obligations under the banking contract between them. Moreover, in any normal case, one would, I think, all other things being equal, expect that a cheque paid in to a customer’s account would be honoured and that the funds would be cleared. I accept that this was not an entirely normal case, but I do not think that one should ignore these basic parameters. As I read the judge’s judgment, he effectively did so.

That said, the essential question remained whether, in the unusual circumstances of this case, where the evidence that was available was at least exiguous, the claimant had shown that he had a real prospect of establishing his amended case.

In considering this question, I do not think that it should be automatically held against Mr Patel that he was seeking to change his case, since his original pleading was based on SCB’s letter dated 26^th January 2009 informing him that there were insufficient funds in RTL’s account to honour the cheque, whilst the amendments were based on a letter dated 31^st March 2014 from Mr Robert Shibutse, an executive director of Equatorial Commercial Bank (apparently SCB’s new name), providing a bank statement for RTL’s account for the first time and informing Mr Patel that SCB’s normal practice in these circumstances would have been to contact RTL and ask it how it intended to fund the account so that the cheque could be honoured.

I agree with Moore-Bick LJ that the bank statement was not sufficient evidence to support the contention that SCB would have advanced funds to RTL to honour the cheque. Mr Shibutse’s letter makes no mention of that possibility and the movements on the account do not support it.

But I do not agree that there was no evidence to support the second proposition that, had the cheque been presented to SCB for payment as it should have been, RTL would not have responded to SCB’s request for funds to honour the cheque. In my view, there were 5 material pieces of evidence that needed to be considered:-

These pieces of evidence were of varying strength, but they could not, I think, be wholly disregarded. Accepting all the strictures correctly suggested by Moore-Bick LJ as to the other evidence that could, or perhaps should, have been available, I think the judge was wrong not to have identified and addressed these 5 matters specifically.

Had he done so, I think he would have concluded that there was some prospect of Mr Patel establishing at the trial that the cheque would, had it been presented on time, have been honoured by RTL providing funds to SCB to allow that to happen. The evidence in favour of that possibility would have had to be weighed up at a trial against the contrary evidence which indicated that the possibility was simply speculative. That contrary evidence has been mentioned by Moore-Bick LJ and by the judge, but was mostly circumstantial evidence concerning the undoubtedly shadowy relationships between Mr Patel, Mr Jirongo and RTL. In my view, however, the judge was wrong, in effect, to undertake a mini-trial of the case. There was some evidence that the cheque might have been honoured and in my judgment, he ought to have moved on to consider whether, in the exercise of his discretion on the principles he set out from Swain-Mason supra, the amendment should have been allowed.

In exercising his discretion, if he did, the judge once more fell into error. He recorded at paragraph 27 of his judgment that it had not been suggested by NatWest that the amendment would necessitate an adjournment, when we were told that NatWest had said exactly that. In any event, the judge acted on what I regard as being the wrong basis that the absence of evidence as to the likelihood of the cheque being paid was “fatal to the proposed amendments anyway”. In these circumstances, I take the view that this court should exercise the discretion afresh.

The problem, however, is that the situation is now very different from what it was when the judge heard the matter. At that time, the trial was in prospect and there was seemingly some misunderstanding as to the need for an adjournment had the judge allowed the amendment. As it seems to me, the judge might properly have been in two minds as to whether an adjournment was truly needed to allow NatWest fairly to contest the amended claim on the basis of the very limited factual evidence available to Mr Patel. All it really had to do was to cross-examine Mr Patel, which one imagines they must anyway have been mostly prepared to do. In addition, there were disagreements between the parties as to whether the new evidence from SCB could or ought to have been obtained sooner.

In my judgment, on the principles enunciated in Swain-Mason, the judge ought to have taken into account that the new case advanced was not strong – albeit that it was arguable. He would have considered the long delay in bringing the proceedings to trial and in securing the new evidence from SCB, much of which was to be laid at Mr Patel’s door. He would have seen that the first 3 of the 5 pieces of evidence relied on by Mr Patel, which I have listed above, had been available to him for years. And he would have considered the court’s natural resistance to permitting late amendments and the related tougher rules on granting relief from sanctions (see Denton v. TH White [2014] EWCA Civ 906).

Balancing all these factors and taking into account the need to do justice to both parties, I would have concluded that the amendments should not have been allowed in the exercise of the court’s discretion. I would have been particularly influenced by the earlier delays, even taking into account that the new evidence on which the amendment was specifically based had only just appeared, and also by the fact that the new claim that the cheque would have been honoured, though having a real prospect of success, was very far from a strong case.

Accordingly, albeit for somewhat different reasons from those expressed by Moore-Bick LJ, I too would dismiss this appeal.